VietNam Business: foreign

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Monday, February 21, 2011

Survey targets industrial investors

Workers of the Nidec Co operate lathes in HCM City's high-tech park. A survey will assess the impact of foreign investment on industrial development. — VNA/VNS Photo Van Khanh

HA NOI — The Viet Nam Industrial Investor Survey 2010 was officially launched yesterday by the Ministry of Planning and Investment's Foreign Investment Agency (FIA) and the UN Industrial Development Organisation (UNIDO).

The survey, which will be conducted from October 25, 2010 to January 15, 2011, is expected to provide policy-makers with data for assessing the impact of the foreign-invested sector on Viet Nam's economic development by looking specifcally at the impact of foreign investment on the development of domestic enterprises.

The survey will analyse the performance of these enterprises and their assessment of the local business climate and also help enhance the investment capacity of the national institutions.

It will be conducted in nine cities and provinces where the majority of domestic and foreign-invested enterprises are based.

Over 1,640 manufacturing, processing and construction firms - 60 per cent of which are foreign-invested - will be selected randomly from a total of 6,830 firms across Ha Noi, Vinh Phuc, Bac Ninh HCM City, Hai Phong, Da Nang, Binh Duong, Dong Nai and Ba Ria - Vung Tau.

The survey's findings will be consolidated on the web-based interactive Viet Nam Investment Monitoring Platform that enables authorities and enterprises to make enquiries to better understand the domestic investment environment.

FIA director Do Nhat Hoang invited all enterprises to participate in the survey, saying that it would create a chance for participants to get free access to business partners, suppliers and potential customers who have taken part in the UNIDO international network of investment and technological promotion offices.

With UNIDO's technical and financial supports, the survey is expected to be conducted every two years.

In addition to the Investment Monitoring Platform, FIA is joining hands with UNIDO and the Viet Nam Chamber of Commerce and Industry to develop the Supplier and Partnership Exchange (SPX), which is intended to strengthen the linkages between foreign and domestic enterprises in sectors such as metal processing, plastics and footwear.

The survey's data and the SPX will be integrated to support domestic firms in promoting investment and linking them with foreign-invested and large-scale enterprises, said Nilguen Tas, a UNIDO representative in Viet Nam. — VNS

Tuesday, February 8, 2011

Investors face tougher financial capacity tests

HA NOI — A new regulation being drafted by the Ministry of Planning and Investment would impose stricter financial capacity requirements on foreign investors.

Disbursement of foreign investment has lagged far behind the commitments made by foreign investors, suggesting that investors without sufficient financial capacity have still been receiving licences from investment authorities, says the director of the ministry's legal department, Pham Manh Dung.

In many cases, Dung added, foreign investors had registered projects without an intention to bring foreign capital into Viet Nam to implement the projects. Instead, they had sought financing in Viet Nam after obtaining an investment licence.

To deal with these issues, the ministry has drafted a decree that would require investment agencies to verify investors' financial capacity, requiring investors to provide confirmation from internationally reliable banks and credit institutions or other investor guarantees on the source of funding for a project.

The decree would also allow for the withdrawal of investment licences after an assessment of financial capacity of an investor, Dung said.

Thousands of foreign-invested projects had been licensed and allocated land, only to remain idle for years, he noted. Some projects in Ba Ria-Vung Tau Province, for instance, had not broken ground a full decade after being licensed.

Without regulations providing for the withdrawal of licences, some provinces have required foreign investors to post a security deposit equal to 5 per cent of the project's total budget in order to keep the land.

The draft decree would authorise municipal and provincial planning and investment departments to set up boards empowered to suspend foreign-invested projects that have not been put into operation as scheduled without a valid explanation for the delay.

Under the draft decree, projects with investment capital in excess of VND300 billion (US$15.4 million) would also have to be examined for compliance with development master plans for industries and localities.

Projects that had a small scale of investment but required large areas of land could also be turned down on the basis of waste, Dung said, with the regulation aiming to make the most efficient uses of available land.

The draft decree would guide the implementation of the 2005 Law on Investment and, if approved, would replace Decree No 108/2006/ND-CP issued in 2006, Dung added. — VNS

Shady foreign loan offers raise alarm

HA NOI — The State Bank of Viet Nam has issued a warning that some foreign individuals claiming to represent international institutions have recently approached ministries and municipal authorities, offering low-interest loans and non-refundable aid on condition of receiving a Vietnamese Government guarantee.

Therefore, the State Bank has issued Official Document No 7824/NHNN-TD reminding its branches and credit institutions nationwide to cautiously consider loan offers in accordance with foreign debt regulations.

Credit institutions were also told to work closely with law firms, embassies, credit rating agencies and bank agents to verify the financial capacity and legal capacity of foreign partners before entering any agreement. Credit institutions and central bank branches were also ordered to report all documents pertaining to foreign loan offering to the State Bank no later than December 31.

State Bank branches were further instructed to support municipal authorities in preventing credit risks arising from foreign loan offers. — VNS

Tuesday, January 25, 2011

Vietnam orders 150 firms to register prices

Vietnam orders 150 firms to register prices The Ministry of Finance has named 150 companies that must register their prices with the authorities, including major foreign-owned dairy firms.

The list of companies was published Thursday on the government website.

It named seven dairy firms, including foreign producers like Friesland Campina, Nestlé, Mead Johnson, Meiji and 3A Pharma, the official distributor of Abbott in Vietnam.

Also on the list are eight cement producers, 18 steel companies, eight sugar producers, 10 animal feed manufacturers and five liquefied petroleum gas (LPG) traders.

These companies will be required to register their prices when they launch a new product for the first time or whenever ordered to do so by the authorities.

Previous regulations required only companies with 50 percent state capital to register their prices with the authorities.

Last month foreign milk companies and the ambassadors of Australia, Canada, New Zealand, the US and the EU raised their concerns about the new price control effort. They said it would affect Vietnam’s commitments as a WTO member and warned that it could also hinder foreign investment.

Nguyen Tien Thoa, head of the Price Management Department at the Ministry of Finance, said the new regulation does not break any WTO commitments.

He said it is in accordance with a previous government decree that lists milk as one of the commodities whose prices must be kept stable.

Monday, January 10, 2011

Central bank asks for foreign exchange reports

Photo: Tuoi Tre

The State Bank of Vietnam has asked credit institutions to provide reports concerning outstanding loans and investments that involve US dollars.

The State Bank is requesting the information so that the institution can begin drafting a monetary policy for the latter months of the year.

Lenders were also told to draw up plans concerning how they will use their foreign currency reserves to pay debt during this year's final quarter and next year's first quarter.

The report must be completed and delivered to the State Bank this Friday.

By the end of September, total outstanding loans in foreign currencies at banks in Ho Chi Minh City were VND186.1 trillion (US$9.5 billion), up 36 per cent against the same period last year.

The US dollar credit growth during September increased by 6.1 percent against August, while the month-on-month dollar credit growth in August was up just 1 percent against July.

In an unusual move, loans in foreign currencies exceeded mobilized capital. Financial experts explained that banks had a surplus of US dollars that they received from mother companies or foreign credit institutions.

This is the second time the central bank has asked for such reports.

In May, commercial banks and financial companies were ordered to provide a detailed report about their foreign exchange operations to help reduce the country's trade deficit and improve Vietnam's payment balance.

Friday, January 7, 2011

Travel show ends with positive feedback from business

Tran Thai Nguyen (L), assistant director of sales and marketing of the five-star Rex Hotel, discusses with a foreign visitor at the International Travel Expo in HCMC late last week - Photo: Dao Loan

HCMC – The sixth International Travel Expo closed in HCMC last Saturday with positive feedback from local tourism services providers given a rise in foreign buyers and promising deals at the event.

The organizers of the three-day exhibition at the Saigon Convention and Exhibition Center in District 7 are still taking formal reports from exhibitors but what local exhibitors have said indicates better results than last year’s event.

Doan Thi Thanh Tra, marketing manager of Saigontourist Travel Service Co., told the Daily that the tour operators met 55 potential buyers who pledged to cooperate, send tourists and hold more talks.

“We met product managers and people in charge of market development and will have more negotiations later,” she said, adding many buyers in previous events came to seek information only.

According to the organizing committee, there were around 170 local exhibitors and about 150 foreign buyers at the event, up by nearly 50 from the last travel expo.

Other local sellers told the Daily that in the previous shows, many foreign people posed themselves as buyers but just visited the events to sell their products and services.

“The event did not attract as many buyers as professional events in foreign countries but we met real buyers there. It’s better than the last events,” said Nguyen Minh Quyen, deputy director of Ben Thanh Tourist Travel Service Center.

The Vietnam National Administration of Tourism and the HCMC Department of Culture, Sports and Tourism joined hands with IIR Exhibitions Pte Ltd and VINEXAD to organize the expo.

Thursday, January 6, 2011

Province cuts red tape for investors

Photo: Reuters

Binh Duong province has made every effort to improve its infrastructure and administrative formalities so as to attract more foreign investors, said chairman of the provincial People's Committee, Nguyen Hoang Son.

The province had also taken advantage of its geography and offered incentives to lure foreign invested projects.

The province attracted more than 846 foreign invested projects with registered capital reaching US$7.3 billion between 2005 and 2010, bringing the total number of projects in the province to date to 1,966 capitalised at $13.5 billion, said Son.

Investors include Korean tyre manufacturer Kumho Asian Group, with a total investment capital of $360 million and Thailand 's Siam Cement Group, which specialises in producing packages, with a total investment capital of $140 million. Malaysian property developer SP Setia Berhad Group invested $620 million in the My Phuoc eco-urban project and a $60 million beverage factory was financed by Japan 's Kirin Acecook Vietnam .

The strong attraction for foreign invested projects was a positive sign, as it made a very important contribution to the province's economic development and generated high industrial value, said director of the Department of Planning and Development Huynh Van Trai.

Local authorities have worked with vocational schools to train skilled workers to meet the greater labour demands that come with more foreign invested projects.

Paik In Ki, chairman of the Republic of Korea ’s Financial Investment Association in Binh Duong, said foreign investos were pleased to invest in the province as they could see good infrastructure and good support from local authorities which helped investors to be successful. His company would continue to act as a bridge to provide other Korean businesses with a deep understanding of the province's investment climate and raise their investment in the province.

Binh Duong has developed 28 industrial parks covering 8,751ha.

Prominent projects in the province include the VND3.5 trillion (US$179.5 million) My Phuoc-Tan Van road, which is currently under construction. The road will be a major transportation route to international airports and seaports.

Kang Myong Jun, diretor of DJV Ltd Co, Automotive Manufacturing & Wholesales-Parts, Automotive Repair & Service, said apart from good infrastructure, other facilities such as accommodation and urban areas were also important for luring foreign investors.

Province cuts red tape for investors

Binh Duong province has made every effort to improve its infrastructure
and administrative formalities so as to attract more foreign investors,
said chairman of the provincial People's Committee, Nguyen Hoang Son.

The province had also taken advantage of its geography and offered incentives to lure foreign invested projects.

The province attracted more than 846 foreign invested projects with
registered capital reaching 7.3 billion USD between 2005 and 2010,
bringing the total number of projects in the province to date to 1,966
capitalised at 13.5 billion USD, said Son.

Investors
include Korean tyre manufacturer Kumho Asian Group, with a total
investment capital of 360 million USD and Thailand 's Siam Cement
Group, which specialises in producing packages, with a total investment
capital of 140 million USD. Malaysian property developer SP Setia Berhad
Group invested 620 million USD in the My Phuoc eco-urban project and a
60 million USD beverage factory was financed by Japan 's Kirin Acecook
Vietnam .

The strong attraction for foreign
invested projects was a positive sign, as it made a very important
contribution to the province's economic development and generated high
industrial value, said director of the Department of Planning and
Development Huynh Van Trai.

Local authorities have
worked with vocational schools to train skilled workers to meet the
greater labour demands that come with more foreign invested projects.

Paik In Ki, chairman of the Republic of Korea ’s
Financial Investment Association in Binh Duong, said foreign investos
were pleased to invest in the province as they could see good
infrastructure and good support from local authorities which helped
investors to be successful. His company would continue to act as a
bridge to provide other Korean businesses with a deep understanding of
the province's investment climate and raise their investment in the
province.

Binh Duong has developed 28 industrial parks covering 8,751ha.

Prominent projects in the province include the 3.5 trillion VND (179.5
million USD) My Phuoc-Tan Van road, which is currently under
construction. The road will be a major transportation route to
international airports and seaports.

Kang Myong Jun,
diretor of DJV Ltd Co, Automotive Manufacturing & Wholesales-Parts,
Automotive Repair & Service, said apart from good infrastructure,
other facilities such as accommodation and urban areas were also
important for luring foreign investors./.

Monday, January 3, 2011

EVN Telecom speeds up privatization

EVN Telecom speeds up privatization EVN Telecom, a subsidiary of state-owned Electricity of Vietnam, plans to complete its share selloff this year as the company is facing financial difficulties, news website VnExpress reported Friday.

The phone company will sell up to 30 percent of its shares in an initial public offering and at least 20 percent to foreign strategic partners, the report said. Foreign candidates have to meet certain requirements including experience in operating 3G networks.

VnExpress said two foreign institutional investors and two local companies have offered to become EVN Telecom’s partners.

The report cited an unnamed source as saying that EVN Telecom has had to speed up the process of equitization (the term for privatization in Vietnam) because the company faces financial difficulties and increased competition from other mobile phone carriers.

Vo Quang Lam, deputy general director at EVN Telecom, said the plan to sell shares to foreign investors has been approved by the government.

As negotiations are ongoing, the names of the prospective investors cannot be announced now, Lam said.

Three local telecom companies have partnered with foreign firms – Hanoi Telecom, S-Fone and Gtel. However, the partnerships are unstable and likely to fail, VnExpress noted.

EVN Telecom speeds up privatization

Monday, December 20, 2010

VN welcomes 3.7 mln foreign visitors in nine months

The number of foreign visitors to Vietnam in the first nine months of
this year reached over 3.7 million, up 34.2 percent over the same period
of last year, according to the General Statistics Office.

Of the total, the number of leisure visitors for reached over
2.3 million, up 43.3 percent, that of business visitors was over
757,000, up 39.8 percent and the number of arrivals who visited
relatives increased by 2 percent to 425,000.

Cambodia registered the highest growth in the number of visitors to
Vietnam, up over 92 percent. It was followed by China, Thailand, the
Republic of Korea and Australia with a growth of 89 percent, 35 percent,
29 percent and 27 percent, respectively.

Experts
forecast that the number of foreign visitors to Vietnam would continue
to increase as a series of major domestic and international events will
be held in the country between now and the end of this year, especially
activities to celebrate the 1,000 th anniversary of Thang Long-Hanoi
from October 1-10.

The tourism sector is expected to welcome 4.2 million international tourists this year./.

Friday, December 3, 2010

Exhibitors hopeful of deals at healthcare show

Entrepreneurs in a talk at the Pharmed & Healthcare Vietnam 2010 - Photo: Dao Loan

HCMC – Nearly 230 local and foreign pharmaceutical and healthcare firms are pinning high hopes on a healthcare exhibition that kicked off in HCMC on Wednesday.

While many local firms are introducing new medicines and materials at the four-day Pharmed and Healthcare Vietnam 2010, foreign participants seek deals to sell machinery, equipment and new technologies for drug production and clinics.

The fifth annual exhibition at Tan Binh Exhibition and Convention Center in Tan Binh District features some 370 booths of local and foreign firms, including those from the Netherlands, Russia, England, France, Germany and Canada.

Representatives of some local firms told the Daily that their companies want to promote new medicines and find foreign partners to export products while foreign enterprises are looking for local clients and distributors.

“We are promoting a new cough medicine made from herbal materials and want to find foreign partners here. We’ve met some potential partners this morning,” said Nguyen Thi My Hanh, deputy sales director of OPC Pharmaceutical Joint-Stock Company.

She said OPC has exported medicine to Laos, Cambodia, and Eastern Europe, and has just had a partner from Nigeria. However, the company wants to increase the export proportion in its total revenue.

Pham Duc Thinh, chief representative of Vietnam-Korea Medical Corporation, said the company wanted to boost sales of equipment and to seek partners from local hospitals.

“We’ve found some clients in last year’s exhibition. We hope to find some new clients here,” he said.

Petra Kopecka, head of international relations of BTL, a manufacturer of physical therapy and cardiology products, said the local market was growing and “that’s why the company has just opened an office in the country along with joining the exhibition to promote products and seek local distributors.”

“I’m very much positive about business in Vietnam,” she said.

Deputy Minister of Health Cao Minh Quang said, “Both local and foreign firms are having a big chance to develop business in the country.”

The ministry is carrying out a plan to build more hospitals in districts and provinces across the country, he said, so “there are huge investment opportunities for entrepreneurs because the sector has the high demand for infrastructure, health equipment and technology transfer,” he said at the opening ceremony.

The event is organized by the Vietnam Pharmaceutical Companies Association, Advertisement and Fair Exhibitions Co., Health Communication and Education Center, and Vietnam Medical Products Import-Export JSC.

Friday, November 26, 2010

New rules on foreign investment in companies

Lawyers of Bizconsult Law Firm

A year after Decree No 88/ 2009/QD-TTg was issued to govern capital contributions and share purchases by foreign investors in Vietnamese enterprises, the Ministry of Finance has finally issued its guiding regulations.

Circular No 131/2010/TT – BTC of September 6, 2010, repeats the list of foreign investors stipulated in Decree 88, which includes: (i) institutions incorporated and operating under foreign law and their branches in or outside of Viet Nam; (ii) enterprises in which a foreign entity holds of over 49 per cent of charter capital; (iii) investment funds with foreign capital of more than 49 per cent; and (iv) individuals who are not Vietnamese by citizenship.

The circular permits these foreign investors to invest or purchase shares or interests in all types of Vietnamese enterprises, including limited liability companies, unlisted joint stock companies, State-owned enterprises, and private enterprises. To do so, foreign investors must maintain bank accounts at licensed commercial banks in Viet Nam, and individual investors must pass a criminal background check.

Any change in the corporate form of the target which results from a capital contribution or share purchase must be registered in accordance with provisions in the Law on Enterprises and Government and Decree No 139/2007/ND-CP of September 2007.

Circular No 131, which takes effect on October 15, also includes specific guidelines for conducting capital contribution and share purchases. Under the circular, foreign investors may conduct transactions themselves or through qualified agents.

Residential real estate transactions regulated

The Ministry of Construction issued Circular No 16/2010/TT-BXD on September 1, providing detailed guidelines for the implementation of Government Decree No 71/2010/ND-CP of June 23, 2010, regarding residential real estate transactions.

Under Article 8 of Circular 16, developers can raise capital from banks, credit institutions, investment funds, corporate bonds, secondary investors and other organisations or individuals. However, each individual or household within a city or province may contribute capital in-kind only once to only a single residence.

Under Article 20 of the circular, enterprises licensed to conduct real estate transactions must meet conditions on business registration, legal capital, and publication of transactions on real estate exchanges, before entering into any transactions.

But the regulation gives individuals and organisations not licensed to conduct real estate transactions more favorable conditions. These investors are not required to meet business registration and legal capital conditions, and their transactions can be certified by the developer of a particular real estate project without any costs and fees.

The circular, which includes related model contracts, takes effect in 45 days from its promulgation.

Monday, November 22, 2010

Central bank eyes foreign currency in property deals

The State Bank of Vietnam's branch in HCMC this week will inspect the use of foreign currencies in real estate transactions in the locality.

Nguyen Hoang Minh, deputy director of the branch, said the SBV's move was aimed not only to ensure the serious implementation of Vietnamese laws but also to protect real estate buyers from losses caused by forex fluctuations.

The branch has already prepared a list of real estate companies eligible for inspection to be carried out without any advance notification.

This week, inspections will focus on real-estate companies allegedly using the US dollar in their business.

The SBV hopes to check two or three real estate companies a week.

Real estate owners will be penalised at a level heavier than current fines if any violation is discovered, according to Minh.

According to Vietnam's current laws, all transactions and payments in the country must not be implemented in foreign currencies, except those that are carried out with credit organisations, and payment forms that require intermediaries.

However, the use of foreign currencies including the US dollars was still very popular in big cities, especially in real estate transactions, Minh said.

Most transactions related to high-grade properties include villas or luxurious apartments now using foreign currencies, particularly the greenback, according to Bui Tien Thang, deputy director of the Sai Gon Commercial Real Estate Joint Stock Company (Sacomreal).

There were many reasons that made real estate owners prefer the greenback to the domestic currency (Vietnamese dong), Thang said.

Most foreign investors want to be paid in US dollars because such a payment form is familiar to them.

In addition, their partners often use the US dollar as they have to contribute their capital to the projects.

As a result, the price of finished real estate products has to be established in the US dollar, which facilitates payments among the involved sides.

Thang, however, said that a main reason that the greenback was used in real estate payments was that project owners would not have to suffer losses as the Vietnamese dong will likely be devalued.

Many individual investors, most of them rent their houses, have also wanted to fix their rental charges in US dollar, but they then received dong. With this method, they expected to keep their capital intact, he said.

The current penalty of VND30 million maximum applied to violators is too low, which allowed investors to continue using foreign currencies.

An official of the HCMC Real Estate Association also admitted that the association suggested that real estate companies should not use the foreign currency in establishing product prices. However, the latter insisted on their option of the US dollar in payments.

Over the past years, authorised agencies have checked and penalised only consumer goods traders who used the foreign currency in their transactions.

Sunday, November 21, 2010

Central bank eyes foreign currency in real estate deals

The State Bank of Vietnam's branch in HCM City this week will inspect
the use of foreign currencies in real estate transactions in the
locality.

Nguyen Hoang Minh, deputy director of the branch, said the SBV's move
was aimed not only to ensure the serious implementation of Vietnamese
laws but also to protect real estate buyers from losses caused by forex
fluctuations.

The branch has already prepared a list of
real estate companies eligible for inspection to be carried out without
any advance notification.

This week, inspections will focus on real-estate companies allegedly using the US dollar in their business.

The SBV hopes to check two or three real estate companies a week.

Real estate owners will be penalised at a level heavier than current fines if any violation is discovered, according to Minh.

According to Vietnam's current laws, all transactions and payments in
the country must not be implemented in foreign currencies, except those
that are carried out with credit organisations, and payment forms that
require intermediaries.

However, the use of foreign
currencies including the US dollars was still very popular in big
cities, especially in real estate transactions, Minh said.

Most transactions related to high-grade properties include villas or
luxurious apartments now using foreign currencies, particularly the
greenback, according to Bui Tien Thang, deputy director of the Sai Gon
Commercial Real Estate Joint Stock Company (Sacomreal).

There were many reasons that made real estate owners prefer the
greenback to the domestic currency (Vietnamese dong), Thang said.

Most foreign investors want to be paid in US dollars because such a payment form is familiar to them.

In addition, their partners often use the US dollar as they have to contribute their capital to the projects.

As a result, the price of finished real estate products has to be
established in the US dollar, which facilitates payments among the
involved sides.

Thang, however, said that a main reason
that the greenback was used in real estate payments was that project
owners would not have to suffer losses as the Vietnamese dong will
likely be devalued.

Many individual investors, most of
them rent their houses, have also wanted to fix their rental charges in
US dollar, but they then received dong. With this method, they expected
to keep their capital intact, he said.

The current penalty
of 30 million VND maximum applied to violators is too low, which
allowed investors to continue using foreign currencies.

An
official of the HCM City Real Estate Association also admitted that the
association suggested that real estate companies should not use the
foreign currency in establishing product prices. However, the latter
insisted on their option of the US dollar in payments.

Over the past years, authorised agencies have checked and penalised only
consumer goods traders who used the foreign currency in their
transactions./.

Central bank eyes foreign currency in real estate deals

HCM CITY — The State Bank of Viet Nam's branch in HCM City this week will inspect the use of foreign currencies in real estate transactions in the locality.

The branch has already prepared a list of real estate companies eligible for inspection to be carried out without any advance notification.

This week, inspections will focus on real-estate companies allegedly using the US dollar in their business.

The SBV hopes to check two or three real estate companies a week.

Real estate owners will be penalised at a level heavier than current fines if any violation is discovered, according to Minh.

According to Viet Nam's current laws, all transactions and payments in the country must not be implemented in foreign currencies, except those that are carried out with credit organisations, and payment forms that require intermediaries.

However, the use of foreign currencies including the US dollars was still very popular in big cities, especially in real estate transactions, Minh said.

There were many reasons that made real estate owners prefer the greenback to the domestic currency (dong), Thang said.

Most foreign investors want to be paid in US dollars because such a payment form is familiar to them.

In addition, their partners often use the US dollar as they have to contribute their capital to the projects.

As a result, the price of finished real estate products has to be established in the US dollar, which facilitates payments among the involved sides.

Thang, however, said that a main reason that the greenback was used in real estate payments was that project owners would not have to suffer losses as the Vietnamese dong will likely be devalued.

The current penalty of VND30 million maximum applied to violators is too low, which allowed investors to continue using foreign currencies.

An official of the HCM City Real Estate Association also admitted that the association suggested that real estate companies should not use the foreign currency in establishing product prices. However, the latter insisted on their option of the US dollar in payments.

Over the past years, authorised agencies have checked and penalised only consumer goods traders who used the foreign currency in their transactions.— VNS

Saturday, November 20, 2010

Welcome, don’t restrict foreign retailers: experts

Economic Needs Test could be a counter-productive entry barrier

A Lotte Mart outlet in Ho Chi Minh City’s District 11. Experts said it is better for Vietnam to encourage foreign retailers to come to the local market rather than restrict them.

Vietnam should encourage foreign retailers to come into the country and develop the immature market rather than restrict their entry, local and international experts have said.

They said at a conference in Ho Chi Minh City last week that the Economic Needs Test (ENT) the Vietnamese government is preparing would disadvantage the retailers in developing outlets and also make it more difficult for local officials to monitor the sector.

Any foreign firm wishing to open more than two retail outlets in Vietnam must apply for a license and pass the ENT criteria that the World Trade Organization allows each member state to establish in order to prevent market overkill in the retail sector.

However, ENT was a very difficult provision to create, said Robert Rogowsky, adjunct professor of International Trade at George Mason University’s School of Public Policy in the US. Instead, “it (the government) should try to create something healthy for the market.”

Rogowsky told Thanh Nien Weekly that it would be a problem for the government to devise and apply ENT for a market that is dynamic and fast-changing in different regions like HCMC, Hanoi and other areas.

The professor said it was better to spend time on encouraging foreign retailers to come and work with local producers and farmers rather than to create a formula for the ENT, which was not being used by governments, including that of China, to monitor their retail markets.

Francois Bobrie, economics professor at France-based Unversite de Poitier, said governments considered the ENT a measure to protect their local

retailers but generally did not use it, opting instead to set other requirements like outlet size that retailers had to meet if they wanted to develop their chain. For example, one of the requirements would be that an additional outlet must have a space of over 1,000 square meters to open in a specific area, he said.

It was not clear, however, as to how such stipulations would act as entry barriers to huge foreign firms that typically muscle in on domestic territory and send local firms out of business. It has been seen elsewhere that the entry of the foreign firms itself creates an unlevel playing ground because they have enormous capital and other resources that are impossible for domestic firms to match, local experts said.

Meanwhile, Vietnam has no law on the retail sector and the market has developed based on the Commercial Law and other related regulations, noted Fred Burke, director of law firm Baker & McKenzie Vietnam.

Former minister of Industry and Trade Truong Dinh Tuyen agreed that Vietnam needed a retail law but asserted that in the current situation, the Vietnamese government should apply the ENT.

Tuyen said the absence of ENT criteria was creating pressure on household-run retail establishments and reducing market transparency for foreign investors.

However, it was not easy to formulate the ENT in such a way that it would meet the twin goals of facilitating FDI in the retail sector through clear and transparent regulations, while at the same time preventing a market glut, the former minister said.

An official from the HCMC Industry and Trade Department said local officials lacked regulations as well as guidance to deal with applications from foreign retailers seeking licenses to open more outlets in the country’s most dynamic market.

“This is strange considering several international firms have already established their presence in the city,” said the official, who did not want to be named.

Foreign retailers including Korean Lotte Mart, Malaysian Parkson and German Metro Cash & Carry have open more than two outlets in Vietnam.

In a meeting with the municipal administration last month, members of the Japanese Business Association of HCMC asked for ENT guidelines so they would know what conditions they had to meet to develop their business here.

Representatives of Japanese firms said they were interested in the Vietnamese retail market, which was fully opened to foreign investors early last year, but they were hesitant to implement projects because they were not sure what they needed to do to pass the ENT test.

The Ministry of Industry and Trade said it was preparing ENT provisions that would apply to both local and foreign traders.

The ENT would be based on three criteria: the number of retail establishments, market stability and resident density, the ministry said.

Under one proposal being considered, local governments would establish a council to conduct the test and its outcome would need to be approved by the ministry.

Vietnam posted retail sales of US$65 billion in 2009, according to Tuyen. The nation’s gross domestic product last year was estimated at $80-90 billion.